(54 pages)

CAEP/8-IP/029

International Civil Aviation Organization

INFORMATION PAPER

CAEP/8-IP/29

6/1/10

English only

COMMITTEE ON AVIATION ENVIRONMENTAL PROTECTION (CAEP)

EIGTH MEETING 

Montreal, 1 to 12 February 2010 

Agenda Item 2: Review of technical proposals relating to aircraft engine emissions

AVIATION ENVIRONMENTAL PORTFOLIO MANAGEMENT TOOL FOR ECONOMICS 

(APMT-ECONOMICS) AND ITS APPLICATION IN THE CAEP/8 

NOx STRINGENCY ANALYSIS

(Presented by the United States)

SUMMARY

This paper updates the status and capabilities of the Aviation Portfolio 

Management Tool for Economics (APMT-Economics).1 It also documents 

the use of the tool in supporting the CAEP/8 NOX stringency analysis.

The Federal Aviation Administration (FAA), in collaboration with the 

National Aeronautics and Space Administration (NASA) and Transport 

Canada, is developing a comprehensive suite of software tools to facilitate 

thorough consideration of aviation's environmental effects. The main goal 

of this effort is to develop a critically needed ability to characterize and 

quantify the interdependencies among aviation-related noise and emissions, 

impacts on health and welfare, and industry and consumer costs, under 

different policy, technology, operational, and market scenarios. The 

APMT-Economics component of the tools suite models airline and aviation 

market responses to environmental policy options.

The ICAO CAEP Forecasting and Economic analysis Support Group 

(FESG) reviewed and concluded that APMT-Economics was appropriate 

for use on the CAEP/8 NOX stringency analysis.2 APMT-Economics 

analysis results, using both the Operations-led and Economics-led modes, 

are included in the Appendix.

 

1 The Aviation Environmental Portfolio Management Tool (APMT) was formally introduced to the CAEP Steering 

Group at the November 2004, Bonn meeting. Since that time the Steering Group, FESG, and MODTF have been 

kept informed of APMT research and demonstration developments. CAEP/7_IP/25, APMT Progress

2 CAEP-SG/20082-IP/06
CAEP/8-IP/29

1. INTRODUCTION

1.1 In the past, modeling tools that supported CAEP generated either noise or emissions 

outputs, against which policy costs were calculated. CAEP considered the cost to implement a policy 

against a single environmental performance indicator (e.g., noise emitted). With the advent of the work 

on common databases and inputs, for a given policy scenario CAEP will have the ability to consider 

noise, local air quality, fuel burn, greenhouse gas emissions, plus industry and consumer cost 

interdependencies. The Federal Aviation Administration (FAA), in collaboration with Transport Canada 

and the National Aeronautics and Space Administration (NASA), is developing a comprehensive suite of 

software tools to facilitate thorough consideration of aviation's environmental effects. The main goal of 

this effort is to develop a critically needed ability to characterize and quantify the interdependencies 

among aviation-related noise and emissions, impacts on health and welfare, and industry and consumer 

costs, under different policy, technology, operational, and market scenarios. The component of the tools 

suite that models airline and aviation market responses to environmental policy options is entitled the 

Aviation Portfolio Management Tool for Economics (APMT-Economics).3

1.2 Beginning in 2004, information on APMT has been submitted to CAEP and stakeholders, 

including the initial APMT requirements and architecture studies and prototyping plan.4 APMT Progress 

was last reported to the CAEP in February 2007, in CAEP/7_IP/25. 

1.3 In accordance with Task F.03, the Forecasting and Economic analysis Support Group 

(FESG) reviewed the economic components of the Aviation Environmental Portfolio Management Tool, 

namely the APMT-Economics. The review was completed and results presented to the CAEP Steering 

Group in September 2008. APMT-Economics was subsequently used in the CAEP/8 NOX stringency 

analysis.

5

1.4 This paper serves to update CAEP on the progress and capabilities of APMT-Economics.

2. NOX STRINGENCY ANALYSIS AND COMPARISON

2.1 CAEP tasked FESG and the Modelling and Database Task Force (MODTF) to conduct 

an analysis of stringency scenarios to reduce emissions of nitrogen oxides (NOX) relative to the ICAO 

CAEP/6 standard as an element of the CAEP/8 work programme. Ten stringency options were analysed 

for two potential implementation years, 2012 and 2016, with potential changes ranging from between 5% 

and 20% compared to the current standards. The analysis was based on an assessment of the extent of the 

technology, environment and costs that would result from modifying, where appropriate, the existing inproduction engines to meet the range of scenarios. For the analysis, MODTF assessed emissions 

reductions and potential environmental trade-offs for the scenarios. FESG established the costs 

assumptions and assessed overall cost-effectiveness of the stringencies. The final cost-effectiveness 

 

3 APMT-Economics was formerly named the APMT Partial Equilibrium Block (PEB)

4 Requirements Document for the APMT. Ian Waitz, et al. June 2006. (Report No. PARTNER-COE-2006-001), 

http://mit.edu/aeroastro/partner/reports/apmt-requirmnts-rpt2006-001.pdf ; 

Architecture Study for the APMT. Ian Waitz, et al. June 2006. (Report No. PARTNER-COE-2006-002), 

http://mit.edu/aeroastro/partner/reports/apmt-arch-rpt2006-002.pdf; 

Prototype Work Plan for the APMT. Ian Waitz, et al. June 2006. (Report No. PARTNER-COE-2006-003), 

http://mit.edu/aeroastro/partner/reports/apmt-prototype-rpt2006-003.pdf

5 The FESG NOX Cost Spreadsheet Model (NOX-CSM) was used as the primary tool in the economic assessment of 

the NOX stringency scenarios under consideration for CAEP/8. APMT-Economics was used to compare results 

to the FESG NOX-CSM for a selected number of scenarios. [CAEP/8-IP/14] 
- 3 - CAEP/8-IP/029

results were presented as costs per tonne of NOX reduction for the ICAO Landing Take-Off (LTO) cycle 

in a joint MODTF-FESG paper to CAEP/8 (WP015).

2.2 For the CAEP/8 NOX stringency analysis, the NOX Cost Spreadsheet Model (NOX-CSM)

was the principal tool used for calculating costs, and APMT-Economics was used to verify the results. 

Specifically, APMT-Economics was used to compute cost-effectiveness for two of the higher stringency 

scenarios, with high range cost assumptions, using the different APMT-Economics modes. The 

Operations-led mode employed MODTF representation of the FESG forecasts of aircraft operations. The 

Economics-led mode used APMT-Economics representation of the FESG forecasts.

2.3 Prior to analyzing all of the scenarios with the NOX-CSM, the cost outputs from APMTEconomics in both operations-led and economics-led modes were compared to the results from equivalent 

tests using the NOX-CSM. APMT-Economics and NOX-CSM employ different approaches; namely, the 

NOX-CSM computes costs derived from the differences in aviation activity computed by MODTF, while 

the APMT-Economics approach is to compute the total industry costs with and without the stringency 

options and then compare the total cost differences. Consequently, there are some differences in the 

computation and treatment of individual cost components; these effects, however, are understood and are 

reasonable given the differences in modelling approaches. Indeed, as the figure illustrates the results 

from the alternative modelling approaches show a consistent ranking and a consistent contribution to the 

overall costs is made from the various components.

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

Str07 ECS

2012

Str07 ECS

2016

Str10 ECS

2012

Str10 ECS

2016

Str07 OPS

2012

Str07 OPS

2016

Str10 OPS

2012

Str10 OPS

2016

Str07 NCM

2012

Str07 NCM

2016

Str10 NCM

2012

Str10 NCM

2016

a. Non-Recurring E&D Cost c. Incremental Engine Production Cost d. Annual Maintenance Cost Increase

e. Annual Fuel Cost Increase f. Annual Loss Revenue (MTOW limited flights) g. Cost in Additional Spare Engines

APMT-Economics: Economics-led APMT-Economics: Operations-led NOx Cost Model

Figure 1: Comparison of Costs by Component between APMT-Economics and NOX-CSM

2.4 The consistency of the overall forecasts is robust. Particularly when the range of total 

cost outputs ($1Bn to $4Bn) resulting from the two modelling approaches are viewed in the context of the 

overall airline industry costs, which are projected to range between $420Bn in 2006 to approximately 

$1,600 Bn in 2036.
CAEP/8-IP/29

3. CONCLUSION

3.1 Through this analysis APMT-Economics demonstrates its application to a NOX

stringency analysis. It also demonstrates flexibility in employing assumptions that match those prepared 

by the ICAO CAEP FESG. Further, when applied in economics-led forecasting mode, APMTEconomics produces comprehensive and internally consistent forecasts of NOX stringency effects, 

including consistent demand responses to cost changes.

3.2 In the economics-led mode APMT-Economics demonstrates sufficient fidelity to reliably 

and consistently model the demand and costs of interventions relative to a Baseline, that invoke only 

relatively small cost changes, down to the level of a 0.2% annual increase in overall airline operating 

costs. The demand responsive and comprehensive cost forecasting features of APMT-Economics proved 

true the FESG assumption that demand effects can be largely ignored for the main CAEP/8 stringency 

analysis.

3.3 The APMT-Economics results compare well to those of the NOX-CSM overall. Despite 

using different approaches to modelling the stringency measures and the overall scale of aviation industry 

costs, the results at a component level were shown to have a good degree of consistency. CAEP-FESG 

can therefore have confidence that the results from the NOX-CSM were independently confirmed for a 

sample of the stringency tests being undertaken for CAEP/8.

3.4 A comprehensive description of APMT-Economics and analysis results, using both the

Operations-led and Economics-led modes, are included in the Appendix.

— — — — — — — —
CAEP/8-IP/29

 Appendix

APPENDIX 

APMT-ECONOMICS AND ITS APPLICATION IN THE CAEP/8 

NOx STRINGENCY ANALYSIS

CAEP/8-IP/29 

Appendix

APMT-Economics and Its Application in the 

CAEP/8 NOx Stringency Analysis

Report for the U.S. Federal Aviation Administration, Office of Environment 

and Energy, and the US DOT Volpe National Transportation Systems Center

November 2009

 CAEP/8-IP/29 

Appendix

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Document Approval

Primary Author: Richard Hancox

Other Author(s): Caroline Sinclair

Reviewer(s): Caroline Sinclair

Formatted by:

Document Control

Project Title: APMT-Economics and Its Utility in NOx Stringency Analysis

MVA Project Number: C39175

Document Type: Report

CAEP/8-IP/29 

Appendix

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis i

Contents

1 Introduction 1.1

1.1 Background 1.1

1.2 Analysis Overview 1.1

1.3 Report Structure 1.3

2 The APMT-Economics Model 2.1

2.1 Introduction 2.1

2.2 The Aviation Environmental Tools Suite 2.1

2.3 APMT-Economics 2.2

2.4 Reported Validation APMT-Economics Datum for NOx Stringency 2.5

2.5 Baseline Calibration 2.10

3 The Analysis and the Modelling Processes 3.1

3.1 Introduction 3.1

3.2 Scope of APMT-Economics Modelling and Output Comparisons 3.2

3.3 Modelling the NOx Stringency 3.4

3.4 Assumptions Employed 3.6

4 Results from APMT-Economics with the Economics-led 

Approach 4.1

4.1 Introduction 4.1

4.2 APMT-Economics Cost-effectiveness Results 4.1

4.3 Demand Sensitive Forecasts with APMT-Economics 4.5

5 Comparing APMT-Economics and NOx-CSM Results 5.1

5.1 Introduction 5.1

5.2 Comparing APMT-Economics Operations-led Results with the NOx-CSM 5.1

5.3 Comparison of the APMT-Economics Results from Economics-led with the Operations-led 

Approach 5.9

6 Concluding Remarks 6.1
CAEP/8-IP/29

Appendix

Tables

Table 2.1 Datum Year Validation against 2006 Global Supply and Demand 2.7

Table 2.2 Datum Year Validation/Calibration at 2006 Global Costs and Revenues 2.9

Table 2.3 Comparison of APMT-Economics and FESG Passenger Forecasts 2.11

Table 3.2: Common Modelling Assumptions 3.8

Table 4.1 Total effects from 2006 to 2036 of NOx Stringency with APMT-Economics 4.4

Table 4.2 Effects of Costs on Demand for Selected Metrics from 2009 to 2036 for Stringency Option 10 

Implemented in 2012 4.6

Table 4.3 Relative Effect of Costs on Demand and Other Metrics from 2009 to 2036 for Stringency 

Option 10 Implemented in 2012 4.6

Figures

Figure 2.1 Modelling Blocks within the Aviation Environmental Tools Suite 2.2

Figure 2.2 Main processes in APMT-Economics 2.4

Appendices

Appendix A – Revenue Loss Assumptions
CAEP/8-IP/29 

Appendix

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis iii

Summary

This report contains an update on the status and capabilities of the Aviation Portfolio Management 

Tool for Economics (APMT-Economics). It also documents the use of the tool in supporting the 

International Civil Aviation Organization (ICAO) Committee on Aviation Environmental Protection 

(CAEP) NOx stringency analysis prepared for the CAEP/8 Meeting in February 2010.

Through this study APMT-Economics demonstrates its application to a NOx stringency analysis. It also 

demonstrates flexibility in employing assumptions that match those prepared by the ICAO CAEP 

Forecasting and Economic Support Group (FESG). Further, when applied in economics-led forecasting 

mode, APMT-Economics produces comprehensive and internally consistent forecasts of NOx stringency

effects, including consistent demand responses to cost changes.

In the economics-led mode APMT-Economics demonstrates sufficient fidelity to reliably and 

consistently model the demand and costs of interventions relative to a Baseline, that invoke only 

relatively small cost changes, down to the level of a 0.2% annual increase in overall airline operating 

costs. The demand responsive and comprehensive cost forecasting features of APMT-Economics 

proved true the FESG assumption that demand effects can be largely ignored for the main CAEP/8 

stringency analysis.

The APMT-Economics results compare well to those of the NOx Cost Spreadsheet Model (NOx-CSM) 

overall. Despite using different approaches to modelling the stringency measures and the overall 

scale of aviation industry costs, the results at a component level were shown to have a good degree of 

consistency. CAEP-FESG can therefore have confidence that the results from the NOx-CSM were

independently confirmed for a sample of the stringency tests being undertaken for CAEP/8.

 CAEP/8-IP/029

 Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 1.1

1 Introduction

1.1 Background

1.1.1 The Federal Aviation Administration (FAA), in collaboration with the National Aeronautics 

and Space Administration (NASA) and Transport Canada, is developing a comprehensive 

suite of software tools to facilitate thorough consideration of aviation's environmental 

effects. The main goal of this effort is to develop a critically needed ability to characterize 

and quantify the interdependencies among aviation-related noise and emissions, impacts

on health and welfare, and industry and consumer costs, under different policy, 

technology, operational, and market scenarios. The APMT-Economics component of the 

tools suite models airline and aviation market responses to environmental policy options.

6

1.1.2 In 2007, CAEP was tasked to conduct an analysis of stringency scenarios to reduce 

emissions of nitrogen oxides (NOx) relative to the ICAO CAEP/6 standard. Ten stringency 

options were analysed for two potential implementation years, 2012 and 2016, with 

potential changes ranging from between 5% and 20% compared to the current standards. 

The analysis was based on an assessment of the extent of the technology, environment 

and costs that would result from modifying, where appropriate, the existing in-production 

engines to meet the range of scenarios. For the analysis, the CAEP Modelling and 

Database Task Force (MODTF) assessed emissions reductions and potential environmental 

trade-offs for the scenarios. The CAEP Forecasting and Economic Support Group (FESG) 

established the costs assumptions and assessed overall cost-effectiveness of the 

stringencies. The principal tool used for calculating costs was the NOx Cost Spreadsheet 

Model (NOx-CSM) developed by FESG; APMT-Economics was used to verify the results 

calculated with the NOx-CSM. The final cost-effectiveness results were presented as costs 

per tonne of NOx reduction for the ICAO Landing Take-Off (LTO) cycle in a joint MODTFFESG paper to CAEP/8 (WP015). 

1.2 NOx Stringency Analysis and Comparison Overview

1.2.1 For the CAEP/8 NOx stringency analysis, the FESG NOx-CSM was the principal tool used 

for calculating costs; APMT-Economics was used to verify the NOx-CSM results. 

Specifically, APMT-Economics was used to compute cost-effectiveness for two of the 

higher stringency scenarios, with high range cost assumptions.

1.2.2 APMT-Economics can be applied in two ways for a stringency analysis. 

 Using the forecast mix of aircraft operations by aircraft type for future years 

generated by other models – in this case using aircraft operations by aircraft type 

supplied by MODTF after applying the FESG fleet and operations forecasts. This is 

referred to as the Operations-led mode.

 

6 APMT-Economics was formerly named the APMT Partial Equilibrium Block (PEB)
CAEP/8-IP/29

Appendix

 Generating a forecast mix of aircraft operations by aircraft type for future years by 

applying the FESG fleet and operations forecasts directly, and therefore the mix of 

new aircraft introduced to the fleet in forecast years is sensitive to the forecasts of 

aircraft operating costs. This is referred to as the Economics-led mode.

1.2.3 Prior to analyzing all of the scenarios with the NOx-CSM, the cost outputs from APMTEconomics in both operations-led and economics-led modes were compared to the results 

from equivalent tests using the NOx-CSM. APMT-Economics and NOx-CSM employ 

different approaches; namely, the NOx-CSM computes costs derived from the differences 

in aviation activity computed by MODTF, while the APMT-Economics approach is to 

compute the total industry costs with and without the stringency options and then 

compare the total cost differences. Consequently, there are some differences in the 

computation and treatment of individual cost components; these effects, however, are 

understood and are reasonable given the differences in modelling approaches. Indeed, as 

the figure illustrates the results from the alternative modelling approaches show a 

consistent ranking and a consistent contribution to the overall costs is made from the 

various components.

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

Str07 ECS

2012

Str07 ECS

2016

Str10 ECS

2012

Str10 ECS

2016

Str07 OPS

2012

Str07 OPS

2016

Str10 OPS

2012

Str10 OPS

2016

Str07 NCM

2012

Str07 NCM

2016

Str10 NCM

2012

Str10 NCM

2016

a. Non-Recurring E&D Cost c. Incremental Engine Production Cost d. Annual Maintenance Cost Increase

e. Annual Fuel Cost Increase f. Annual Loss Revenue (MTOW limited flights) g. Cost in Additional Spare Engines

APMT-Economics: Economics-led APMT-Economics: Operations-led NOx Cost Model

Figure 1: Comparison of Costs by Component between APMT-Economics and NOx-CSM

1.2.4 The consistency of the overall forecasts is robust. Particularly when the range of total 

cost outputs ($1Bn to $4Bn) resulting from the two modelling approaches are viewed in 

the context of the overall airline industry costs, which are projected to range between 

$420Bn in 2006 to approximately $1600Bn in 2036.
1 Introduction

CAEP/8-IP/29

Appendix A

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 1.3

1.3 Report Structure

1.3.1 Chapter 2 presents a brief description of the APMT-Economics model and notably 

describes the calibration and validation statistics for the version of the model employed in 

this analysis.

1.3.2 Chapter 3 provides an overview of the modelling processes; describing the inputs and 

assumptions to the analysis, the cost and environmental outputs, the processing steps 

required and highlighting observations on the process and any difficulties that were

encountered.

1.3.3 Chapter 4 presents the outputs from applying APMT-Economics in Economics-Led mode 

and includes the effects of demand effects that might result from increases in costs if all 

of these costs are assumed to be passed to consumers.

1.3.4 The comparison of the results from the NOx-CSM and APMT-Economics with OperationsLed Approach are presented in Chapter 5 focusing on the comparative environmental 

outputs, overall and detailed costs and finally illustrating the similarities in the overall 

cost-effectiveness metrics. A comparison is made between the outputs from APMTEconomics in operations-led and economics-led mode is presented at the end of this 

Chapter.

1.3.5 Chapter 6 presents conclusions.

CAEP/8-IP/29

Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 2.1

2 The APMT-Economics Model

2.1 Introduction

2.1.1 The following sections describe the Aviation Environmental Tools Suite, APMT-Economics

and a validation of the Datum and Baseline.

2.2 The Aviation Environmental Tools Suite

2.2.1 The Federal Aviation Administration (FAA), in collaboration with the National Aeronautics 

and Space Administration (NASA) and Transport Canada, is developing a comprehensive 

suite of software tools to facilitate thorough consideration of aviation's environmental 

effects. The main goal of this effort is to develop a critically needed ability to characterize 

and quantify the interdependencies among aviation-related noise and emissions, impacts 

on health and welfare, and industry and consumer costs, under different policy, 

technology, operational, and market scenarios.

2.2.2 Figure 2.1 is a schematic of the Aviation Environmental Tools Suite7. The main functional 

components of the Tools Suite are as follows:

 Environmental Design Space (EDS): estimates source noise, exhaust emissions, 

and performance for potential future and existing aircraft designs;

 Aviation Environmental Design Tool (AEDT): models aircraft performance in

four- dimensional space and time to produce fuel burn, emissions and noise;

 Aviation environmental Portfolio Management Tool for Economics (APMTEconomics): models airline and aviation market responses to environmental policy 

options;

 Aviation environmental Portfolio Management Tool for Impacts

8

(APMTImpacts): estimates the environmental impacts of aircraft operations through 

changes in health and welfare endpoints for climate, air quality and noise; and

 Cost Benefit with the Aviation environmental Portfolio Management Tool 

(APMT-Cost Benefit): combines Tools Suite output to perform cost benefit 

analyses.

 

7 Additional information is available on the FAA website at http://www.faa.gov/about/office_org/headquarters_offices/aep/models/.

8 Additional information on APMT-Impacts is available at http://www.apmt.aero. 
CAEP/8-IP/29

Appendix

Figure 2.1 Modelling Blocks within the Aviation Environmental Tools Suite

2.3 APMT-Economics

2.3.1 APMT-Economics is designed to model aviation market responses to a range of aviation 

scenarios and environmental policy measures that directly affect the aviation industry. 

The model is centred on the decisions that would be made by airlines in response to 

future market conditions where these decisions lead to changes in aviation demand, 

supply and environmental factors. It operates at a relatively disaggregate spatial level of 

detail, but includes a detailed representation of individual aircraft types, aircraft ages and 

fleets.

2.3.2 From an established Datum (Base) year database of air transport demand, supply and 

costs, APMT-Economics projects the future aviation:

 operating costs;

 demand projections and capacity requirements;

 fleet development projections; and

 fleet assignment to an aggregate set of operations.

2.3.3 APMT-Economics produces a set of internally consistent forecasts of the Baseline 

(projection without scenario measures) and Policy (projection with scenario measures) 

situations, allowing for a wide range of aviation industry and consumer responses to the 

potential introduction of environmental policy measures. A principal aim of the model is 

Aviation Environmental Tools Suite

Policy and Scenarios

APMT

Impacts

Aviation 

Environmental 

Design 

Tool

Environmental 

Design Space

What are the airline 

supply & consumer 

demand effects?

What are the aircraft 

design characteristics?

What are the 

noise, 

emissions and 

fuel burn 

outputs?

What are the 

physical & socioeconomic 

environmental 

impacts?

APMT

Aviation Environmental Portfolio Management Tool 

What are the monetized benefits of decision alternatives?

APMT Economics
2 The APMT-Economics Model

CAEP/8-IP/29

Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 2.3

to contribute to the APMT assessment of the interdependencies between aviation-related 

noise and emissions effects and associated environmental costs, and to provide a 

comprehensive analysis of aviation environmental and economic impacts.

2.3.4 A number of different types of main policy responses are distinguished, specifically:

 supply side responses: airlines changing their fleet mix and/or characteristics of 

aircraft in their fleet and measures considered as evasive responses such as 

responses of airlines or airline clients to avoid payment of a charge or taxation;

 demand side responses: changes in air transport demand through fare increases 

following from cost increases; and

 operational responses: airlines changing their flight operation to off-set policy 

induced cost increases

2.3.5 The main objective of APMT-Economics is to establish a comprehensive projection of air 

transport demand and supply, while taking into account:

 the need for additional future aircraft capacity, given the projected air transport 

demand and the retirement of aircraft from the existing fleet; 

 a scenario and policy sensitive selection of fleet replacement and flight operations; 

and

 the cost-driven relationships between demand and supply. 

2.3.6 The matching of demand and supply within APMT-Economics is based on a so-called 

partial equilibrium approach. In this approach, the analysis of changes is limited to the 

market for air transport only, without directly taking into consideration how changes in 

the air transport market might imply changes in other markets. In the context of APMT, 

this means that a new equilibrium is brought about in the market for air travel after a 

change in policy, and the effect of that change on the travelling public and air carriers. 

Within the APMT-Economics functionality, changes in costs to air carriers are translated 

into changes in air fares, leading to an adjustment of air transport demand. Where 

appropriate, exogenous effects that are consistent with the scenario specification can also 

be input to the model; for example, some research has shown that higher fuel prices 

could lead to lower GDP and while APMT-Economics would not compute the GDP effects

directly, these could be input to the model as part of the scenario specification.

2.3.7 Main functional requirements of APMT-Economics include:

 the handling of different Baseline projections of relevant factors affecting air 

transport demand (passengers and freight) and air transport supply (fleet 

development and flight operations);

 the assessment of alternative aviation scenarios and the effect of a variety of 

different air transport related environmental policy measures;
CAEP/8-IP/29

Appendix

 the provision of a coherent and detailed description of present and future air 

transport activities (flight operations) on global, regional, national and local scale; 

and

 the provision of a detailed set of inputs for the computation of the economic effects

on relevant actors in terms of costs, revenues and other direct economic effects.

2.3.8 Figure 2.2 is a diagram of the main steps in the APMT-Economics tool.

(1) Retire Old

Aircraft

(2) Required

capacity

(4) Fleet

Deficit

(3) New Fleet

Costs

(5) New Fleet

(6) Old Fleet

(7) Deploy

Fleet (8) Calculate

Costs 

(9) Calculate

Fares

(10) Calculate

Demand

(11) Forecast

Capacity

Yr+1

(1) Retire Old

Aircraft

(2) Required

capacity

(4) Fleet

Deficit

(3) New Fleet

Costs

(5) New Fleet

(6) Old Fleet

(7) Deploy

Fleet (8) Calculate

Costs 

(9) Calculate

Fares

(10) Calculate

Demand

(11) Forecast

Capacity

Yr+1

(1) Retire Old

Aircraft

(2) Required

capacity

(4) Fleet

Deficit

(3) New Fleet

Costs

(5) New Fleet

(6) Old Fleet

(7) Deploy

Fleet (8) Calculate

Costs 

(9) Calculate

Fares

(10) Calculate

Demand

(11) Forecast

Capacity

Yr+1

Scenario Definition Datum 

Detailed Fleet Deployment (AEDT) Aggregate Cost Calculations 

Figure 2.2 Main processes in APMT-Economics

2.3.9 Given the present air transport demand and operations for a set reference or Datum year, 

an aggregate future air transport demand projection (in terms of passengers and freight 

by country pair) is provided from external sources. Future fleet capacity is adjusted to 

match demand requirements, taking into account the retirement of aircraft from the 

existing fleet. Newly purchased aircraft to replace and expand existing fleet capacity are 

drawn from a set of candidate aircraft designs based on both existing and new 

technology. 

2.3.10 The actual selection of newly purchased aircraft depends on the set of eligible candidate 

designs and a comparison of unit aircraft operating costs (costs per seat). In this 

selection process, the effects of policies (such as operating restrictions or charges that 

increase certain cost components) are taken into account. Changes in aircraft operating 

costs due to the effects of policies may lead to a change in fares, subsequently leading to 

a change in demand. Based on a translation of changes in unit costs to changes in fares, 
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APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 2.5

the partial equilibrium between air transport demand and supply is approximated within 

the APMT-Economics module. 

2.3.11 Following the achievement of the partial equilibrium, the (adjusted) information on 

demand projection, aircraft retirements and aircraft replacements for the forecast 

situation is provided to AEDT. In contrast with the APMT-Economics module, which 

operates on a country-pair9level of spatial aggregation, AEDT works on the level of 

individual airport pairs with fully specified aircraft flight characteristics. Given the 

specification of the detailed flight operations in the present situation (based on the 

information in the Current Air Transport Database), the information provided by the 

APMT-Economics module is used to make the detailed future flight operations projection 

as required by the AEDT. The detailed forecasts are generated by applying a series of 

distributions to the APMT-Economics aggregate forecasts. These distributions apply 

splitting factors for country pair to city pair, engine family to UID and carrier region to 

carrier code.

2.3.12 Within the APMT-Economics module, detailed computations of aircraft operating costs 

take place for all relevant aircraft types, as well as computations of air fares and 

revenues. The information on costs and revenues generated in the APMT-Economics 

module provides the basis for the assessment of actor specific direct economic effects. In 

addition to the air carriers, relevant actors might include: manufacturers, airports, the air 

traffic management operators, and the repair, overhaul and maintenance sector, as well 

as consumers and governments. Direct economic effects may include: (changes in) 

operating costs, revenues and results, employment effects, loss in fleet value, income 

from charges and consumer surplus.

2.3.13 Further details of the functionality of APMT-Economics are contained in the Algorithm 

Design Document (ADD). 

2.4 Reported Validation APMT-Economics Datum for NOx Stringency

2.4.1 This section reports the outturn validation of the Datum and Baseline for the version of 

APMT-Economics used for the CAEP/8 NOx Stringency analysis. It is important that the 

model is validated well against available data in order that it may be considered to be a 

reliable basis from which to analyse the effect of introducing aviation policies. For the 

NOx stringency analysis, the validation of the volume of traffic and fleet is of greater 

importance than the underlying cost validation. The reason for this is that the costs of 

implementing the stringency were provided as additional costs to the industry per engine 

or engine family. So the industry costs of the stringency are derived by applying the 

additional costs to the number of engines affected so the absolute level of cost validation 

is less important.

 

9 Each country-pair flow is disaggregated into groups of routes with common stage lengths and the combination of country-pairs 

and stage lengths are referred to as ‘schedules’.
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2.4.2 The APMT-Economics Datum was calibrated using a dataset that contains the aircraft 

operations and traffic that is consistent with the MODTF work for CAEP/8 Goals analysis. 

This dataset was used for the Datum calibration of APMT-Economics because it is a more 

complete dataset, which includes aircraft of all sizes and is most appropriately calibrated 

to match the FESG fleet and ICAO cost information. However, a different dataset and 

assumptions were used for NOx Stringency analysis and these underlying analysis 

assumptions have some effect on the completeness and the overall level of validation.

2.4.3 APMT-Economics was not re-calibrated specifically for the NOx Stringency analysis and 

therefore the level of validation obtained is not as good as that obtained with the full 

dataset. In particular, the APMT-Economics model application for NOx stringency employs 

the previously calibrated metrics, such as aircraft annual utilisation. It also shares 

commonality of underlying assumptions with AEDT/the NOx-CSM including the following:

 assumes flights follow great circle routes (i.e., not actual distances flown);

 excludes underlying higher growth between airport pairs with longer stage lengths;

 excludes aircraft with fewer than 20 seats Russian-built aircraft

2.4.4 The MODTF NOx Stringency analysis uses great circle distance for future aircraft 

operations rather then more accurate representations of aircraft routings based on radar 

track information. This approach was employed as a simplification for the emissions 

modelling and has no effect on the ranking of alternatives. Great circle distances were

used in the APMT-Economics analysis. The use of great circle distances lead to greater 

variation from observed data than in previously reported Datum validations10. Metrics 

such as total distance and number of aircraft (as fewer aircraft will be required as the 

distance flown is shorter) and cost data that are based on aircraft kilometres or block 

hours flown will be affected by this approach.

2.4.5 The FESG forecasts include an inherent increase in average distance by distance band 

through time, which is not captured in the MODTF data that were derived by applying 

factors by stage length (and route group and seat class) to the Datum representation. In 

order to mirror the NOx-CSM as closely as possible, no growth in average distance 

through time was modelled in APMT-Economics. This lead to further deviation of 

operating costs and revenues in the Baseline from the outturns that would be obtained 

using all aspects of the FESG forecasts.

2.4.6 The 2006 Datum was developed from a six week sample of operations from the MODTF 

consensus dataset (AEDT), consistent with the base data used to generate the forecasts 

used in the NOx-CSM analysis. The data was processed to remove freighter operations 

and passenger aircraft with fewer than 20 seats. The data was then matched to fleet data 

for 2006 from Campbell Hill and FESG to provide the characteristics of the fleet 

undertaking the operations. This data provided the starting point from which the FESG 

demand and supply forecasts were applied to establish the Baseline.

 

10 Analysis of Aviation & Fuel Price Scenarios for U.S. Participation in the ICAO Group on International Aviation and Climate Change; 

MVA Consultancy, May 2009
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APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 2.7

Supply and Demand

2.4.7 The validation of the Datum was undertaken against available data from FESG, ICAO and 

AEDT. Table 2.1 contains a summary of the supply and demand validation at a global 

level.

Table 2.1 Datum Year Validation against 2006 Global Supply and Demand

Metric APMTEconomicsObserved Δ % Δ Observed Data 

Source

Total Aircraft 15783 1731011-1527 -9% FESG

Operations (m) 23.3 25.6 -2.3 -9%

AEDT, but including 

aircraft < 20 seats

Distance (bn km) 32.6 34.4 -1.9 -5% ICAO

Passenger km (bn km) 4195.8 4222.0 -26.3 -1% ICAO

Passenger load factor (%) 75 76 -1 -1% FESG

Fuel use (bn kg) 177.0 175.5 1.5 1%

AEDT, but including 

aircraft < 20 seats

2.4.8 As noted above, the average aircraft utilisation rates (aircraft hours per annum) were

calibrated so that the APMT-Economics model for an equivalent of the CAEP/8 Goals 

analysis matches the number of aircraft in the FESG fleet, adjusted to remove Russianbuilt aircraft since these are excluded from the MODTF analysis. The calibration was

undertaken on a seat class basis, so each seat class replicates the corresponding FESG 

value. The seat class aircraft utilisations have then been applied to the NOx problem 

version of APMT-Economics. As noted earlier, the calibration was undertaken for the 

‘Goals’ version of the model as it has a more realistic representation of aircraft 

movements as actual flight distances are included. The reduced distances flown in the 

NOx analysis version of APMT-Economics means that less aircraft are required to 

undertake the operations, since the calibrated individual aircraft utilisations have not been 

adjusted for the specific NOx stringency analysis.

2.4.9 The number of operations undertaken was validated against the number of operations in 

the 2006 AEDT operations, and used as the basis for the NOx-CSM modelling. Table 2.1

shows that the APMT-Economics operations are within 9% of the AEDT operations. The 

9% difference is due to the inclusion of aircraft with fewer than 20 seats in the AEDT but 

not in APMT-Economics. There are 23.3m (0% different) operations in AEDT by aircraft 

with greater than 20 seats. Data from ICAO suggests that there were approximately 27 

million movements per annum in 2006, which would include operations of aircraft with 

fewer than 20 seats.

 

11 Minus Russian-built aircraft and those <20 seats.
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2.4.10 The number of aircraft kilometres (34 billion km) operated in 2006 according to ICAO is 

slightly higher than in APMT-Economics due to the additional operations by small aircraft 

included in the ICAO data. The passenger demand estimates in APMT-Economics were

taken directly from the FESG reported data. APMT-Economics has slightly lower 

passenger kilometres in the Datum than the ICAO equivalent.

2.4.11 The fuel and NOx per km and per cycle for airframe/engine combinations was derived 

from the MODTF (AEDT) dataset used for the NOx stringency analysis. The global fuel 

consumption and NOx emissions are within 1% of the AEDT equivalents.

Costs and Revenues

2.4.12 ICAO also produces cost and revenue data that was used for validation and calibration of 

the Datum representation in APMT-Economics. A summary of the validation is shown in

Table 2.2. This validation is affected particularly by the assumption for NOx stringency to 

work with great circle distances rather than actual flights and the result of this is that the 

model is expected to under-represent the costs and revenues associated with air 

transport operation.

2.4.13 Validating against costs and revenues is not as straightforward as validating against 

supply and demand data, given different reporting of the data by aircraft type. Average 

operating costs for individual aircraft types in APMT-Economics are based on Form 41, 

reported regional variations in labour costs, aircraft prices from AVMARK, fuel use from 

AEDT, and the average Quarter 1 fuel price for 2006. Fares were calibrated so that the 

global profit margin reported by ICAO for 2006 was achieved. All cost and revenue 

metrics were validated against ICAO data.
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APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 2.9

Table 2.2 Datum Year Validation/Calibration at 2006 Global Costs and Revenues

Metric APMTEconomicsObserved Δ % Δ

Crew costs ($bn) 32.2 31.9 0.3 1%

Maintenance costs ($bn) 33.9 41.7 -7.9 -19%

Depreciation & Finance ($bn) 57.0 61.6 -4.6 -7%

Landing costs ($bn) 14.9 15.5 -0.6 -4%

Route costs ($bn) 9.0 9.8 -0.8 -9%

Total fuel cost ($bn) 105.6 105.7 -0.1 0%

Operating expenses ($bn) 384.2 439.5 -55.3 -13%

Unit costs (Op exp/ATK) U.S. cents 66.5 71.0 4.5 -6%

Operating revenues ($bn) 396.8 452.5 -55.7 -12%

Yields (Op rev/RTK) U.S. cents 93.5 96.0 -2.5 -3%

2.4.14 The results that airlines report to ICAO are open to considerable interpretation about the 

data items that go into each category and therefore we have allowed a higher deviation 

from the validation data. Given the lower number of operations and aircraft in APMTEconomics than in the ICAO reported data, the data in Table 2.2 shows that APMTEconomics is within 10% on most items which is considered to be an acceptable level of 

validation, given a level of uncertainty in the reported aggregate data.

2.4.15 The validation against crew costs is very close as the overall unit labour costs were

adjusted downward on a regional basis to meet the overall target.

2.4.16 The maintenance costs in APMT-Economics for NOx Stringency are somewhat lower 

than the reported level from ICAO yet the global maintenance costs in the Goals 

calibration version are around 9% lower than ICAO data. The lower number of aircraft in 

the fleet in the NOx stringency version has a large effect on the reported maintenance 

cost validation which also affects the reported overall operating cost and revenue 

validation for the NOx stringency version of the model. A future task could be to improve 

the maintenance cost information used in APMT-Economics.

2.4.17 Capital, landing and route costs in APMT-Economics are close to, but slightly less than 

the ICAO equivalents and these costs are all low due to the assumptions employed in the 

NOx stringency version of the model. Capital costs in APMT-Economics include all 

ownership and leased costs since it is not possible to separate these costs, and they must 

all be included for the fleet selection algorithm in APMT-Economics.

2.4.18 The APMT-Economics Datum uses fuel consumption data from AEDT and an average fuel 

price of 60 U.S. cents/kg, with regional variation from ICAO data. The resulting overall 

fuel cost in APMT-Economics is very close to that published by ICAO. 
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2.4.19 Overall Operating Expenses and Revenues in APMT-Economics are just over 10% less 

than the data reported by ICAO, however the yields and unit costs in APMT-Economics are 

only 3-6% lower than the ICAO data.

2.4.20 At a global level, the cost and revenue results of APMT-Economics appear to validate 

reasonably well against the ICAO data, despite the removal of Russian aircraft, aircraft 

with fewer than 20 seats and not considering actual flight distances. . As noted above, 

the absolute level of cost validation is not critical to the NOx stringency analysis as the 

Intervention models additional costs to the industry.

2.5 Baseline Calibration

2.5.1 A 30 year Baseline was modelled using the FESG demand and capacity forecasts and 

applying the FESG retirement curves to the fleet. For the purposes of the NOx stringency 

analysis an underlying growth in average distance through time was not included in the 

APMT-Economics representation to maintain similarity to the AEDT/NOx-CSM modelling. 

The average utilisations by seat class were modified through time so that the fleet by seat 

class matches the FESG fleet by seat class. As with the Datum utilisations, the utilisation 

calibration is based on the Goals representation. There are no improvements in the 

underlying aircraft technology – it is ‘frozen’ at the technology offered in the Datum. The 

NOx stringency analysis assumptions (see Chapter 3) dictate that the fuel price increases 

from an average 60 cents/kg in 2006 to 97 cents/kg in 2016, and remains constant at 

this rate until the end of the forecast period.

2.5.2 The key trends in demand and supply in the NOx Problem Baseline are illustrated in 

Figure 2.3:

 Passenger demand grows faster than seats – implying higher load factors 

(consistent with FESG);

 Seats grow faster than flights - implying increases in aircraft size;

 Aircraft kilometres grow faster than flights – implying an increase in aircraft trip 

length (and there is also an increase in passenger and seat km); and

 Aircraft km grow faster than Fleet – demonstrating higher aircraft utilisation.

2.5.3 The underlying passenger data from APMT-Economics and the FESG forecast is also 

provided, and shows that the 10 year period growths in the key elements is within 2 

percentage points for all metrics apart from the fleet. Note that the APMT-Economics 

fleet was calibrated to the FESG fleet, adjusted to remove Russian aircraft
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APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 2.11

Growth in Demand and Operation Parameters in the Baseline

(All Operations)

100

150

200

250

300

350

400

450

2006200820102012201420162018202020222024202620282030203220342036

Index 100 = 2006

Flights Aircraft km (great circle distance)

Pax Dem Seats

Fuel use Fleet

Figure 2.3 Forecast Growth in Demand and Operational Parameters

Table 2.3 Comparison of APMT-Economics and FESG Passenger Forecasts

APMTEconomics 2006 2016 2026 2036Growth 

2006-2016

Growth 

2016-2026

Growth 

2026-2036

ASK (bn) 5585 8880 13719 21281 59% 54% 55%

RPK (bn) 4196 6927 11073 17152 65% 60% 55%

Fleet in Service 15754 22265 29957 41680 41% 35% 39%

Flights (m) 22.2 31.9 44.7 63.1 43% 40% 41%

Total Km (m) 30593 45784 65381 93170 50% 43% 43%

FESG Data 2006 2016 2026 2036 2006-2016 2016-2026 2026-2036

ASK (bn) 5666 8989 13837 21341 59% 54% 54%

RPK (bn) 4269 7024 11196 17247 65% 59% 54%

Fleet in Service 18773 25906 34787 47503 38% 34% 37%

Flights (m) 27.1 38.7 54.1 75.7 43% 40% 40%
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Total Km (m) 32550 48410 68634 96720 49% 42% 41%

2.5.4 Figure 2.4 illustrates the growth in costs in the Baseline. The growth in direct operating 

costs is accelerated in the initial years of the forecast, driven by the assumed increase in 

fuel price during this period.

0

50

100

150

200

250

300

350

400

450

500

2006200820102012201420162018202020222024202620282030203220342036

Index 100 = 2006

Growth in Costs in the Baseline (All Operations)

Direct Aircraft Operating Costs Volume Related Operating Costs

Capital Costs Total Operating Costs

Figure 2.4 Growth in Costs in the NOx Problem Baseline

2.5.5 These effects on demand and supply lead to the following changes in costs:

 the outturn unit costs are forecast to reduce, despite the cost components not 

changing through time and this is due to changes in the forecast mix of aircraft 

types and the natural retirement and turnover of the fleet;

 Fuel/RTK decreases by about 17% by 2036, as old, less fuel efficient are retired 

and replaced by more efficient aircraft. Increases in load factors and changes in 

aircraft size type also lead to fuel use efficiencies;

 Direct operating costs increase initially, driven by the assumed increase in fuel price 

to 2016, and then reduce steadily over time, due to changes in aircraft sizes and 

associated crew to passenger ratio efficiencies; and
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APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 2.13

 Total unit costs fall slightly slower since there are capital costs of new aircraft to 

consider and these do not fall so quickly in unit terms.

0

20

40

60

80

100

120

140

160

2006200820102012201420162018202020222024202620282030203220342036

Index 100 = 2006

Growth in Operation Metrics in the Baseline (All Operations)

Direct Operating Costs/RTK Total Operating Cost/RTK

Fuel/RTK Fuel/ATK

RTK/Aircraft-km Fuel/Aircraft-km

Figure 2.5 Baseline Growth in Key Operations Metrics

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 Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 3.1

3 The Analysis and the Modelling Processes

3.1 Introduction

3.1.1 Ten NOx stringency cases are being analysed as part of the CAEP/8 work programme

(Table 3.1) with alternative potential implementation dates of 31 December 2012 and 

2016.

Figure 3.1 NOx Stringency Cases

NOx Stringency 

Case

Small Engine

(26.7kN / 89kN)

Large

Engine (Slope>30OPR)

1 -5% / -5% -5% 2

2 -10% / -10% -10% 2.2

3 -10% / -10% -10% 2

4 -5% / -15% -15% 2.2

5 -15% / -15% -15% 2.2

6 -5% / -15% -15% 2

7 -15% / -15% -15% 2

8 -10% / -20% -20% 2.2

9 -15% / -20% -20% 2.2

10 -20% / -20% -20% 2.2

3.1.2 The CAEP analysis method focuses on the effects on engine and aircraft types that are 

currently or scheduled to be in production. Each of the currently ‘available’ engine types 

is assessed for compliance against each of the potential stringencies and each passes or 

fails a compliance test for their NOx emissions. CAEP Working Group 3 (WG3) has then 

provided an assessment of the modifications that would be needed to make these current 

engine types compliant with each stringency level and this assessment is based on the 

margin by which the existing engine would fail the stringency.

3.1.3 The modifications were grouped by engine family type and categorised in ascending level 

of requirement for technological improvement and cost into three levels:

 MS1 – minor changes to engine requiring no substantive material change to engine 

combustor hardware or operating costs.

 MS2 – scaling up of best-proven technology to ensure compliance of the engine 

with the stringency.
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 MS3 - applying new combustor technology from research programmes.

3.1.4 A common set of cost assumptions was agreed by FESG with the support of other CAEP 

Working Groups. The classification of the aircraft engines into these modification 

categories to ensure compliance at each stringency level is key to the analysis and this is 

reflected in the definition of the cost and operational modelling assumptions.

3.2 Scope of APMT-Economics Modelling and Output Comparisons

3.2.1 As previously described, the NOx Cost Model is being used by CAEP FESG to prepare the 

main cost and cost-effectiveness analysis of NOx Stringency for the CAEP/8 work 

programme. In this context, APMT-Economics is being used as an alternative tool to 

cross check these findings for a sample of the NOx Stringency test cases. For the 

purposes of demonstrating the capability of APMT-Economics and comparing the results 

from the two models, APMT-Economics was used for two of the more stringent cases only: 

case 7 and case 10 (highlighted in Table 2.1). These two stringency levels were chosen 

for comparison because they were expected to give rise to the largest cost changes of all 

of the tests since these required some aircraft engines to undergo MS3 modifications to 

comply with the stringencies. The comparisons are made for both the 2012 and 2016 

implementation scenarios.

3.2.2 As described below, the two tools use different computational methods to derive the costs

of the stringency measures, but the analysis is based on the same detailed projections of 

aircraft operations used by MODTF to compute the environmental effects.

3.2.3 The focus of the overall CAEP analysis is to present the cost-effectiveness of the 

stringency measures in reducing NOx emissions associated with the LTO cycle and 

therefore this is the key comparison that is made between the two sets of modelling 

results. In addition, it is appropriate to show the comparison of the overall costs and, 

where possible, the breakdown of the costs by component. 

3.2.4 The categorisation and components of costs considered in the analysis are summarised as 

follows:

Non-recurring Costs

The ‘one-time’ costs for manufacturers associated with developing the new technology 

engine designs and undertaking the aircraft certification process

 Research and development costs for new engines – a high and low range of nonrecurring costs that could be incurred by manufacturers is presented, noting that it 

is assumed that these costs would not be passed to airlines (or consumers) through 

higher aircraft purchase prices. For the purposes of the stringency test analysis, 

the non-recurring costs are assumed to be incurred by the manufacturers equally in 

each of four years prior to the implementation of the stringency (so for the 31 

December 2016 implementation the costs are assumed to be spread across 2013 to 

2016)
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APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 3.3

Recurring Costs

Ongoing additional costs would be incurred in production of future new purchases of 

compliant engines which for APMT-Economics are assumed to be reflected in their 

purchase price. Furthermore some additional operating costs would be incurred by 

airlines in operating aircraft with the compliant engine types.

 Incremental Engine Production Costs – the additional costs associated with the 

production of new engines through more expensive manufacturing processes.

 Annual Maintenance Cost Increase – there are some additional maintenance 

costs associated with engines that are compliant with the stringency.

 Annual Fuel Cost Increase – there is a potential fuel use penalty associated with 

ensuring the engines are compliant with the NOx stringency of between 0% (no 

penalty) and 0.5% for the MS3 modified engines. For the purposes of the 

comparison with the NOx-CSM, the maximum 0.5% penalty is assumed.

 Annual Loss in Revenue (MTOW limited flights) – given the potential for the fuel 

use penalty there is the likelihood that for longer flights, the MTOW will be limited 

and in some operational instances this would result in the need to limit payload and 

hence a potential loss in revenue.

 Additional Spare Engines as a measure of the potential requirement for aircraft 

to hold two sets of replacement engines for their fleet where they hold both 

stringency compliant and non-compliant engines together.

3.2.5 There is a further cost component associated with the Loss in Value for existing fleets 

where the aircraft are fitted with engines that become non-compliant (and potentially less 

tradable between airlines) following the introduction of the stringency. The APMTEconomics analysis and comparison to the NOx-CSM presented without this cost 

component.

3.2.6 In the full NOx-CSM analysis a range of discount rates of 0%, 3%, 7% and 9% are 

applied to the costs and the LTO NOx emissions to establish the present value of the costeffectiveness under a number of discounting scenarios. The analysis with the NOx-CSM

has illustrated that the discounting does not affect the rank ordering of the stringency 

effects. As a simplification the comparison work with APMT-Economics was undertaken 

without discounting of the costs and benefits.

3.2.7 The full CAEP analysis with the NOx-CSM splits the effects between those for the small 

and large engines. For the purposes of the comparison between the NOx-CSM and APMTEconomics, the combined effect alone was presented since in cost terms this is dominated 

by the potential compliance costs associated with the large engines for the stringency 

options analysed with APMT-Economics. However, it is noted that in cost-effectiveness
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Appendix

terms the cost of reducing LTO NOx through stringency on the small engines is 

significantly higher than that for the large engines.

3.3 Modelling the NOx Stringency

Steps Required for the NOx Stringency Analysis with APMT-Economics

3.3.1 Following the calibration of the APMT-Economics Datum and Baseline, the steps involved 

in the NOx Stringency Analysis with APMT-Economics in either operations or economics 

led modes require the:

 Allocation of named aircraft engine types to compliance categories MS1 to MS3 

(and non-compliance or non-modified) for each of the stringencies.

 Creation of model inputs to represent the new compliant aircraft types as copies of 

the existing replacement fleet with appropriate modifications to reflect the cost and 

operational changes necessary to make the existing aircraft compliant, at the 

appropriate enforcement year. Effectively an input database is required for each 

stringency test because the modifications required to define each of the 

replacement aircraft differ between the stringencies (for example, an aircraft may 

need an MS2 modification under one stringency scenario and an MS3 modification 

under a scenario with a more stringent certification standard).

3.3.2 In Operations-Led mode the steps are then to:

 Run the stringency scenario for APMT-Economics in Economics-Led mode to 

establish the fleet age profile.

 For each stringency scenario and forecast year (2016, 2026, 2036), a separate 

APMT-Economics single year database is created for the Baseline and Intervention 

(i.e. with stringency applied) by importing the forecast of aircraft operations 

provided by MODTF and applying the fleet age profile determined from the 

Economics-led run. This essentially requires a ‘match’ between the aircraft 

operations and the APMT-Economics representation of fleet.

 Once the aircraft operations are input to the database, the APMT-Economics Datum 

cost calculations are performed to generate the overall operating costs by aircraft 

type for either the Baseline and Intervention situations. 

 The complete output databases are then interrogated to provide the necessary data 

for a standard APMT-Economics output scorecard spreadsheet to facilitate the 

interpolation of data for intervening years.

3.3.3 In Economics-led model the processing is more straightforward:

 The FESG forecasts are input to the model by seat class, stage length and routegroup.
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APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 3.5

 The Baseline is executed from each of the input databases and the output results 

are exported from the database to the standard APMT-Economics scorecard12. 

 Intervention tests are executed for each of the stringency test databases for each 

of the potential implementation years. (A single run of APMT-Economics in 

Economics-led mode forecasts on a year-by-year basis and therefore no post 

processing interpolation to obtain the intervening year outputs is required.)

 The output databases are interrogated to provide additional analysis specific 

computations of number of spare engines, lost revenue and, where appropriate, the 

loss in aircraft value.

Summary of Modelling Differences

3.3.4 There are some differences in the modelling approaches between the computations in the 

NOx-CSM and operating APMT-Economics in operations-led mode which will contribute 

to different, though explainable, results being output. These are summarised as

 Recurring Manufacturing Costs: APMT-Economics treats these costs as an 

increase to the new aircraft purchase price and consequently an increase in the 

annual capital (finance and depreciation) costs in any one forecast year. The 

additional purchase costs that reflect the manufacturing costs are therefore spread 

across the whole life operation of the aircraft. The NOx-CSM treats these additional 

costs as occurring wholly in the year in which a modified aircraft is purchased. 

Consequently, the recurring manufacturing costs computed from the NOx-CSM

should be expected to be slightly lower than those computed from APMTEconomics.

 Maintenance Costs: The APMT-Economics cost functions include an increasing 

penalty for maintenance costs as aircraft age, but the NOx-CSM does not include 

information about fleet ages so constant maintenance costs are assumed. 

Consequently the maintenance costs would be slightly higher from the APMTEconomics calculation compared to the NOx-CSM.

 Fuel Costs: The APMT-Economics interpolation of the fuel costs takes into account 

the assumed growth in fuel costs based on a change in oil price from $65 per barrel 

in 2006 to $100 per barrel in 2016. The NOx-CSM applies a constant fuel price for 

all forecast years. The consequence of these slightly different assumptions is that 

for the 2012 implementation there is a marginally lower average cost of fuel in the 

APMT-Economics outputs.

3.3.5 The balance of the contribution of these slightly different modelling treatments will effect

on the overall differences in output costs.

 

12 In this analysis the Baseline results are identical for these two stringency levels as the effect of the different aircraft definitions is 

only invoked in the model’s Intervention responsive mode.
CAEP/8-IP/29

Appendix

3.3.6 There are also some differences in the modelling approaches between APMT-Economics in 

operations-led and economics-led modes which will contribute to different, but 

consistent, results being output, as follows:

 Retirement: In economics-led mode, APMT-Economics applies the FESG aircraft 

retirement curves on a year-by-year basis compared to the one-time application 

and effect on the Datum aircraft fleet that is applied by MODTF. Consequently a 

greater number of new replacement aircraft would be needed in the APMTEconomics forecasts and this would be expected to lead to higher costs of the 

stringency measure compared to the outputs from the operations-led mode.

 Fleet Market Share: The MODTF forecasts include a fixed and equal market share 

across all replacement aircraft types within an aircraft seat category. APMTEconomics computes the market shares using a model that is sensitive to the cost 

per seat and consequently forecasts a lower market share.

Further NOx Stringency Analysis Capability of APMT-Economics

3.3.7 The APMT-Economics model (in economics-led mode) has a demand responsive 

functionality which, by FESG defined assumption, is switched-off for the purposes of the 

main analysis, since the stringency measures are not expected to generate large costs

overall. However, to confirm the validity of the fixed-demand assumption the APMTEconomics, demand sensitive forecasting procedures were invoked for a series of 

sensitivity tests for one of the higher costs NOx stringency specifications.

Analysis Observations

3.3.8 Few difficulties were encountered in preparing the comparison of the NOx-CSM and APMTEconomics in operations-led mode. 

3.3.9 However, in making the comparison between APMT-Economics in operations-led and 

economics led mode, it was discovered that the MODTF processing had only partially 

applied the FESG forecasts such that:

 Aircraft in new seat class 10 (over 600 seats) were omitted. 

 There are no operations in the MODTF forecasts for some seat classes that were not 

represented in the 2006 Common Operations Database (COD), where these had 

been introduced through the FESG forecasting process.

3.3.10 These omissions do have some bearing on the overall forecasts and the magnitude is 

described in Chapter 5. However, there is no effect or bias anticipated on the ranking of 

results.

3.4 Assumptions Employed

3.4.1 Common assumptions are employed in the analysis undertaken by the APMT-Economics

and the NOx-CSM, although the differences in modelling structures requires that in some 

cases these assumptions are input to the process in different ways.
3 The Analysis and the Modelling Processes

CAEP/8-IP/29

Appendix

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 3.7

3.4.2 Table 3.2 presents a summary of the common modelling assumptions. There are some 

detailed underlying analysis assumptions that underpin the derivation of the parameters 

for the revenue loss calculation and the recurring manufacturing costs; these are 

described in Appendix A.
CAEP/8-IP/29

Appendix

3 The Analysis and the Modelling Processes

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 3.8

Table 3.1: Common Modelling Assumptions

Modelling Item CAEP/8 Assumptions Comments

FESG Traffic and 

Fleet forecasts

Central forecasts on the basis of 

unconstrained demand

Forecasts assume that airport and airspace capacity is available to meet 

projected demand growth.

Underlying trend in 

NOx technology

No change over time Simplifying assumption in view of difficulty in making projections of trend 

in NOx emissions and not essential for assessment of NOx stringency –

frozen technology assumption will not affect ranking of options

Future tightening of 

NOx stringency

No further stringency beyond 

options under consideration

Isolate assessment of costs and NOx savings to stringency options being 

analysed

Product compliance Market driven production cut-off 

that takes effect on implementation 

date (2013 or 2017)

Consistent with evidence following past stringency standards, but 

sensitivity tests to be applied to reflect alternative outcomes, in 

particular for 2013 changes requiring MS3

Time-in –mode and 

thrust settings

ICAO certification factors used Likely to over-estimate NOx savings from stringency but more work 

necessary before performance based settings can be used

Market shares Equal market split between 

manufacturers within each seat 

category

Simplifying assumption that avoids difficult assessment of market share 

projections for future years

Technology 

Response 

Categories

MS1, MS2, MS3 ICCAIA cross-reference to CAEP/6 NOx stringency analysis TL concept: 

MS1=TL1, MS2=TL2, MS3=TL5A 

NOx Stringency 

Options

5% to 20% from CAEP/6 Increments of 5%. When considering stringency proposals for small and 

large engines, the resulting number of stringency options to be evaluated 

is 10. See Table 1 in Appendix A 

Base Year 2006 The base year fleet is based on the Campbell-Hill Aviation Group’s 

commercial airline fleet database updated to represent the 2006 yearend.

Time Horizon 2006 – 2036 FESG CAEP/8 20-yr fleet forecast with 10 year extension

NOx Stringency 

Implementation 

Years

2013, 2017 NOx stringency implementation starts on 1 January of 2013 or 2017
3 The Analysis and the Modelling Processes

CAEP/8-IP/29

Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 3.9

Modelling Item CAEP/8 Assumptions Comments

Fuel Price $1.50 - $4.50 per gallon (aver. = 

$3.00/gallon)

Recommendation for CAEP/8 is to use crude oil prices of $50 - $150/bbl, 

with $100/bbl the midpoint. Multiply crude oil price by 1.25 to arrive at 

fuel price per barrel. (42 barrels per gallon)

Financial discount 

rates

0%, 3%, 7%, 9% Use same discount rates as CAEP/6

Non-recurring costs MS1= $1M - $15M

MS2= $50M - $100M

MS3= $100M - $500M

See CAEP/8 Seattle SG paper number CAEP-SG/20082-WP/18

For further description of the NOx technology response. Non-recurring 

costs applied once per engine family

Cost from 

increased noise 

tradeoff for NOx 

technology 

response

Incremental non-recurring for MS3 

= $0, $10M, $100M

[3 sensitivity runs]

Per WG1 recommendation, NSTG to conduct a cost sensitivity analysis on 

three different non-recurring (E&D) scenarios as shown to the left. 

Applied only to MS3 technology response 

Incremental 

recurring 

manufacturing 

(production) costs 

MS1 = $0

MS2 = 0-0.5% (0.25%)

$ 20,000

MS3 =0.2-0.8% (0.5%)

$ 40,000

For CAEP/8 analysis, continue to use the CAEP/6 method for estimating 

recurring costs. Recurring engine manufacturing cost increase is due to 

complexity, material, etc. (does not include amortized non-recurring 

costs).

Incremental fuel 

burn 

MS1= 0%

MS2= 0%

MS3= 0% - 0.5%

From WG3 / ICCAIA Technology Response assumptions. 

Incremental engine 

maintenance cost 

($/EFH)

MS1= $0

MS2= $0 - 2 (aver.= $1)

MS3= $0 - 4 (aver.= $2)

ICCAIA recommendations shown to left.
CAEP/8-IP/29

Appendix

Modelling Item CAEP/8 Assumptions Comments

Lost revenue due 

to incremental fuel 

burn effect from 

MS3 technology 

response.

Aircraft payload / 

range capabilities 

not preserved. 

Instead, estimate 

cost of lost revenue

Percent of Annual Trips MTOW 

limited:

-Twin-Aisle aircraft: 5%

-Single-Aisle aircraft: 0.5%

Representative distance for MTOW 

limited flights:

 Single aisle = 2100 NM

 Twin aisle = 5000 NM

Revenue offload

Single Aisle = -1 PAX (100kg)

For Twin Aisle: 750lb (340 kg)

Revenue Yields at representative 

stage lengths:

Passenger rev. yield = $0.075/RPK

Cargo rev. yield = $0.26/RTK

For CAEP/8, the FESG NOx stringency task group agreed to replace the 

CAEP/6 approach, which assumed aircraft mission and payload 

maintained, with a method to calculate the revenue loss resulting from 

an increase in 0.5% fuelburn for MS3 technology response. This loss of 

revenue would be incurred on long-range MTOW limited missions. The 

frequency of operating at the payload / range limits may be a few 

percent of the annual utilization. 

Cost for 

Incremental Spare 

Engine Inventory

ICCAIA had recommended engine 

inter changeability as follows:

MS1 - 100%

MS2 - 100%

MS3 - 50%

For the MS1 and MS2, where the engines are assumed to be 100% 

interchangeable with the same engine models being manufactured before 

NOx stringency was implemented, then no incremental spare engines 

would be required. For MS3, 50% of the engines receiving MS3 

technology response will require incremental spare engines to support 

the fleet after NOx stringency is implemented due to lack of commonality 

and inter changeability
3 The Analysis and the Modelling Processes

CAEP/8-IP/29

Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 3.11

Modelling Item CAEP/8 Assumptions Comments

Engine price for 

spare engines

Average = $8.6 M

For the 15% stringency for Large 

Engines, a weighted average price 

for engines requiring MS3 was 

estimated to be $24.3M

For the 20% stringency for Large 

Engines, the weighted average 

price for engines requiring MS3 

was estimated to be $12M

The average engine price for the CAEP/8 analysis based on review of the 

mid-2008 AVITAS Engine Value Guide for new engine prices and applying 

engine cycles for the engines to be delivered as growth and replacement 

over the 30 year time horizon as weighting factors is estimated to be 

$8.6M.

A more detailed assessment was used to estimate a weighted average 

engine price to be used for spare engines, considering only those engines 

that would require a MS3 technology response for each stringency 

option. Only the 15% and 20% stringency options required MS3 

responses for some of the engine families.

Spare engine 

function

Use CAEP/6 spares curve Spares curve from CAEP/6 to be used: # installed engines vs. % spares

The equation for estimating the number of spare engines required at the 

global fleet level is:

number spare engines = 0.5891 * number installed engines ^ -0.3758

Loss of Asset Value 

(Residual Value)

ICCAIA recommends

using CAEP/6 values

MS1 = no modification

MS2 = $250,000 per engine

MS3 = $500,000 per engine

Loss of Asset Value is a cost applicable to the production models that will 

not comply with NOx stringency being delivered before the stringency 

implementation year. Once stringency is implemented these same noncompliant engine models receive the MSx technology responses.

CAEP/8-IP/29

Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 4.1

4 Results from APMT-Economics with the 

Economics-led Approach

4.1 Introduction

4.1.1 This Chapter presents APMT-Economics results for CAEP/8 NOx Stringency Options 7 and 

10, which comprise potential stringencies on the certification of new engines as follows:

NOx Stringency 

Case

Small Engine (26.7kN / 

89kN)

Large

Engine (Slope>30OPR)

7 -15% / -15% -15% 2

10 -20% / -20% -20% 2.2

4.1.2 The results described in this Chapter are obtained from running APMT-Economics in its 

primary Economics-led mode.

4.2 APMT-Economics Cost-effectiveness Results

4.2.1 Figure 4.1 presents the cost-effectiveness results, in terms of the cost per tonne of LTO 

NOx reduced, obtained from APMT-Economics assuming the high recurring development 

costs. The figure plots the trade-off between the reduction in LTO NOx (horizontal axis) 

and the increase in CO2 (vertical axis) with the size of the ‘bubbles’ representing the LTO 

NOx reduction cost-effectiveness. The rank order of the cost-effectiveness results 

appears intuitively rational such that:

 Absolute effects on LTO NOx (and CO2) for stringency option 10 are higher than 

those for stringency option 7;

 The rank ordering of the effects on LTO NOx match the rank ordering of effects on 

CO2.

 Delaying implementation from 2012 to 2016 reduces the relative cost-effectiveness

of the measure since the reduction in LTO NOx is smaller but the overall costs are 

similar.

4.2.2 The breakdown of costs by component is displayed in Figure 4.2. The largest effect for 

Stringency option 10 is that on fuel cost. However, for Stringency Option 7 the effects on 

fuel costs are lower, since fewer engines require an MS3 adjustment but there is an 

increasingly significant contribution to the overall costs from the estimated cost of holding 

spare engines, where the approach adopted is similar to that used in the NOx-CSM.
CAEP/8-IP/29

Appendix

Figure 4.1 Cost-effectiveness of NOx Stringency Options with Outturn NOx 

Reduction and CO2 Increase Trade-Off

STR07, 2016

$16,656

STR07, 2012

$14,099

STR10, 2012

$26,242

STR10, 2016

$28,875

-10.00

0.00

10.00

20.00

30.00

40.00

50.00

60.00

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60

Reduction in LTO NOx (Million Tonnes) Increase in CO2 (Million Tonnes)

Cost Effectiveness = 

Cost per Tonne LTO NOx Reduced

(Size of bubble proportionate to cost

effectiveness figures shown)

Figure 4.2 NOx Stringency Effects by Cost Component from APMT-Economics

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

Str07 2012 Str07 2016 Str10 2012 Str10 2016

g. Cost in Additional Spare Engines

f. Annual Loss Revenue (MTOW limited flights)

e. Annual Fuel Cost Increase

d. Annual Maintenance Cost Increase

c. Incremental Engine Production Cost

a. Non-Recurring E&D Cost
4 Results from APMT-Economics with the Economics-led Approach

CAEP/8-IP/29

Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 4.3

4.2.3 The overall effects for a sample of APMT-Economics output metrics for these tests relative 

to the Baseline are illustrated in Table 4.1. The table shows the cumulative effect over 

the forecast years from 2012 to 2036 compared to the forecast Baseline outcome. By 

test assumption there no effects on demand (RTK), operations and aircraft km and it is 

noted that:

 Fleet13- The cost sensitive replacement aircraft selection in APMT-Economics 

results in a very small reduction in the number of aircraft required with the 

interventions compared to the Baseline forecast. The reason for this is that within 

each seat class there is a very small shift to operating aircraft with more seats.

 Fuel Use and Total CO214- The percentage effect on fuel use and CO2 relative 

the Baseline forecast of overall industry output is small, 0.14% or less. Total 

NOx15- as the driver for the stringency is forecast to reduce significantly, by up to 

6.8%.

 Total Cost – due to the stringency measure the modelled airline operating costs 

are expected to increase by at most $28.0 Billion (0.09%) in the default forecast. 

The total costs reported here are those that relate to the recurring costs due to 

additional fuel, maintenance and production costs. The loss in revenue and the 

costs of holding additional spares are computed through post-processing of the 

model outputs. Effectively these costs are assumed not to be passed to consumers 

by airlines but if they were included they would add a maximum of $9Bn to the 

costs and increase the largest percentage increase from 0.06% to 0.08%. 

4.2.4 Sensitivity tests were conducted and reported below been conducted to illustrate the

effect of including all of the costs using the demand responsiveness capability of APMTEconomics invoked, since no demand effects are included as a core assumption for the 

NOx stringency analysis.

 

13 2036 Outturn rather than cumulative total

14 APMT-Economics approximate calculations based on input data from AEDT

15 Note that this is full flight NOx and APMT-Economics approximate calculations based on input data from AEDT
 CAEP/8-IP/29

 Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 4.4

Table 4.1 Total Effects from 2006 to 2036 of NOx Stringency calculated with APMT-Economics

Stringency 7

Metric Unit Baseline

2012 Absolute 

Difference

2012 Percentage 

Difference

2016 Absolute 

Difference

2016 Percentage 

Difference

2036 Fleet aircraft 41680 -2 0.00% -2 0.00%

Fuel Use Million tonnes pa 10821 4.3 0.04% 3.3 0.03%

Total CO2 Million tonnes pa 34139 13.5 0.04% 10.4 0.03%

Total NOx Million tonnes pa 157 -8.4 -5.37% -6.7 -4.28%

Total Costs billion US$ 30048 12.1 0.04% 12.2 0.04%

Stringency 10

Metric Unit Baseline

2012 Absolute 

Difference

2012 Percentage 

Difference

2016 Absolute 

Difference

2016 Percentage 

Difference

2036 Fleet aircraft 41680 -3 -0.01% -3 -0.01%

Fuel Use Million tonnes pa 10821 14.3 0.13% 11.4 0.11%

Total CO2 Million tonnes pa 34139 45.3 0.13% 36.1 0.11%

Total NOx Million tonnes pa 157 -10.7 -6.82% -8.5 -5.43%

Total Costs billion US$ 30048 28.0 0.09% 24.3 0.08%
CAEP/8-IP/29

Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 4.5

4.3 Demand Sensitive Forecasts with APMT-Economics

4.3.1 Two sensitivity tests were undertaken with APMT-Economics for NOx stringency option 10 

with a 2012 implementation year to illustrate that the demand effects that might result 

from stringency measures would be relatively small:

 The first of the two tests assumed that the airlines would pass-on all of their 

increased recurring costs of additional fuel, maintenance and production costs 

(affecting purchase prices) through increased fares; and

 The second of the tests assumed that additionally the airlines would also incur the 

non-recurring costs of engine upgrades and they would pass-on all of these costs 

and the increased recurring costs through increased fares.

4.3.2 The effects of a sample of APMT-Economics output metrics for these tests are illustrated 

in Tables 4.2 and 4.3 as a cumulative effect over the forecast years from 2012 to 2036.

 RTK – The stringency costs would be expected to only have a small effect on the 

demand forecasts, reducing the total RTK over the period 2006 to 2036 by up to 

0.07% of a total cumulative forecast of 32420 billion RTK.

 Aircraft Operations and Aircraft KM – Given small changes in forecast RTK there 

are correspondingly lower forecasts of aircraft activity.

 Fleet16- Given the smaller total requirement for aviation activity then the model 

estimates that the fleet in 2036 would comprise at most just 45 fewer aircraft 

(0.09%) than for the Baseline forecast.

 Fuel Use and Total CO217- Fuel use is forecast to increase by 14.3 million tonnes 

(0.13%) due to the stringency measure without demand effects and this increase is 

for fuel use to increase by a smaller amount, 10.1 million tonnes (0.09%)

 Total NOx18- is forecast to reduce by 6.8% and is forecast to reduce by very 

slightly more due to the demand effects.

 Total Cost – due to the stringency measure is expected to increase by $28.0 Billion 

tonnes (0.10%) in the default forecast.

4.3.3 These outputs confirm the premise underlying the analysis that the effects of the costs of 

stringency on demand are relatively small and for the purposes of ranking the stringency 

options in cost-effectiveness terms can reasonably be ignored for the purposes of ranking 

NOx stringency options.

 

16 2036 Outturn rather than cumulative total

17 APMT-Economics approximate calculations based on input data from AEDT

18 Note that this is full flight NOx and APMT-Economics approximate calculations based on input data from AEDT
 CAEP/8-IP/29

 Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 4.6

Table 4.2

Effects of Costs on Demand for Selected Metrics from 2009 to 2036 for Stringency Option 10 Implemented in 2012

No Demand Effects Demand Effects Demand Effects and 

Recurring Costs

Metric Unit Baseline

Absolute 

Intervention 

Effect

% 

Intervention 

Effect

Absolute 

Intervention 

Effect

% 

Intervention 

Effect

Absolute 

Intervention 

Effect

% 

Intervention 

Effect

RTK billion RTK pa 32420 0.0 0.00% -19.5 -0.06% -22.4 -0.07%

Operations million flights pa 1281 0.0 0.00% -0.7 -0.05% -0.7 -0.06%

Aircraft Km billion ac-km pa 1894 0.0 0.00% -1.0 -0.05% -1.1 -0.06%

2036 Fleet aircraft 41680 -3.0 0.00% -41.1 -0.09% -45.5 -0.10%

Fuel Use million tonnes pa 10821 14.3 0.13% 10.1 0.09% 9.2 0.09%

Total CO2 million tonnes pa 34139 45.3 0.13% 31.9 0.09% 29.0 0.09%

Total NOx million tonnes pa 157 -10.7 -6.80% -10.7 -6.84% -10.7 -6.84%

Total Costs billion US$ 30048 28.0 0.09% 15.6 0.05% 16.4 0.05%

Table 4.3 Relative Effect of Costs on Demand and Other Metrics from 2009 to 2036 for Stringency Option 10 Implemented in

2012

Metric Unit Demand Effect

Recurring Cost and 

Demand Effect

RTK billion RTK pa -19.5 -22.41

Operations million flights pa -0.7 -0.73

Aircraft Km billion ac-km pa -1.0 -1.13

2036 Fleet aircraft -38.1 -45.5

Fuel Use million tonnes pa -4.2 -5.1

Total CO2 million tonnes pa -13.4 -16.2

Total NOx million tonnes pa -0.1 -0.1

Total Costs billion US$ -12.4 -11.6
CAEP/8-IP/29

Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 5.1

5 Comparing APMT-Economics and NOx-CSM

Results

5.1 Introduction

5.1.1 The results from the APMT-Economics tests can be compared to those from the NOx-CSM

for both the 2012 and 2016 implementation scenarios for these two stringency levels. 

The results from APMT-Economics presented in Chapter 4 are from the model operating in 

economics-led mode and as noted earlier the model can also be run in operations-led

mode where the operations forecasts by aircraft type are those used by MODTF. 

5.1.2 This chapter reports a comparison of the consistency of the results from APMT-Economics 

in operations-led mode with the NOx-CSM and then with APMT-Economics in economicsled mode:

 The operations-led to NOx-CSM comparison illustrates the degree of commonality 

between the cost computations and processing of the MODTF application of the 

FESG forecasts.

 The operations-led to economics-led comparison illustrates the effects of the 

economics-led modelling approach and application of the FESG forecasts.

5.2 Comparing APMT-Economics Operations-led Results with the NOx-CSM

5.2.1 The presentation of the comparison between APMT-Economics in operations-led mode and 

the NOx-CSM is broken down as follows:

 Emission comparison, noting that the APMT-Economics computations of Fuel use 

and NOx are approximations of the computations made by AEDT;

 Overall comparison of the costs and a comparison of the cost components; and

 The comparison of the outturn cost-effectiveness measures

5.2.2 The outputs for both the APMT-Economics and the NOx-CSM are based on the sum of the 

effects between 2009 and 2036.

Emission Outputs

5.2.3 Figure 5.1 presents a comparison of the total saving in NOx used in the two modelling 

approaches for the cost-effectiveness analysis. The NOx-CSM does not itself compute 

NOx emissions and the figures shown here are from the Local Air Quality forecasts 

prepared by MODTF. The APMT-Economics model approximates the computation of NOx 

based on inputs from AEDT, however for the purposes of this comparative analysis these 

outputs have needed to be calibrated to the values computed from the MODTF local air 

quality modelling.
CAEP/8-IP/29

Appendix

5.2.4 As Figure 4.1 shows, the LTO NOx used in the comparison of the Cost-effectiveness is 

very similar.

Figure 5.1 Forecast Total Saving in LTO NOx

0.000

0.200

0.400

0.600

0.800

1.000

1.200

1.400

Str7 2012 Str7 2016 Str10 2012 Str10 2016 Reduction in Tonne LTO Nox (Milion Tonnes)

NCSM

APMT-E Stringency

Implementation 

Year NCSM APMT-E % Difference

Absolute 

Difference

7 2012 0.933 0.943 1.1% 0.010

7 2016 0.744 0.742 -0.2% -0.002 

10 2012 1.249 1.243 -0.4% -0.006 

10 2016 0.995 0.978 -1.8% -0.017 

Reduction in LTO NOx (Million Tonnes)
5 Comparing APMT-Economics and NOx-CSM Results

CAEP/8-IP/29

Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 5.3

5.2.5 Figure 5.2 illustrates the changes in fuel use implied from the two modelling approaches. 

The CO2 values for APMT-Economics are approximations based on the detailed 

computations of fuel use and CO2 from AEDT. The NOx-CSM does not compute fuel use 

or CO2 and the values used in the comparison are drawn directly from the MODTF models. 

For NOx Stringency Option 10 the results are shown to demonstrate a particularly close

match.

Figure 5.2 Forecast Increase in Full Flight CO2 Emissions due to NOx Stringency

0.000

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

45.000

Str7 2012 Str7 2016 Str10 2012 Str10 2016 Increase in CO2 (Milion Tonnes)

NCSM

APMT-E Stringency

Implementation 

Year NCSM APMT-E % Difference

Absolute 

Difference

7 2012 9.831 9.121 -7.2% -0.709 

7 2016 7.679 7.055 -8.1% -0.624 

10 2012 41.234 41.361 0.3% 0.126

10 2016 31.900 31.759 -0.4% -0.141 

Increase in CO2 (Million Tonnes)
CAEP/8-IP/29

Appendix

Forecast Cost Effects

5.2.6 The APMT-Economics computations of costs are made without discounting and including 

the maximum assumption for the MS3 fuel use penalty, since this will illustrate the 

maximum effect and when compared to the NOx-CSM expose the maximum absolute

differences between the two models.

5.2.7 Figure 5.3 demonstrates that overall there is strong agreement between the total costs of 

the NOx stringency measures computed from the NOx-CSM and APMT-Economics. The 

results from using the different models, with the same input assumptions, compare well

with the largest difference between the two models being 7%. The computed values 

between the two models are very close for Stringency option 10, within 1%. 

5.2.8 APMT-Economics consistently computes smaller cost effects of stringency measures and 

the contribution of the individual components are described below.
5 Comparing APMT-Economics and NOx-CSM Results

CAEP/8-IP/29

Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 5.5

Figure 5.3 Total Cost Outputs from APMT-Economics and the NOx-CSM (0% 

Discount Rate)

Cost Comparison

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

Str7 2012

Low

Str7 2012

High

Str7 2016

Low

Str7 2016

High

Str10 2012

Low

Str10 2012

High

Str10 2016

Low

Str10 2016

High Cost ($ Million)

NCSM

APMT-E Stringency

Implementation 

Year

Recurring 

Cost 

Scenario NCSM APMT-E % Difference

Absolute 

Difference

7 2012 Low $ 10,084 $ 9,516 -5.6% $ -568 

7 2012 High $ 11,262 $ 10,694 -5.0% $ -568 

7 2016 Low $ 9,421 $ 8,763 -7.0% $ -658 

7 2016 High $ 10,599 $ 9,941 -6.2% $ -658 

10 2012 Low $ 27,060 $ 27,190 0.5% $ 130

10 2012 High $ 30,216 $ 30,346 0.4% $ 130

10 2016 Low $ 23,487 $ 23,360 -0.5% $ -127 

10 2016 High $ 26,643 $ 26,516 -0.5% $ -127 

Costs in $Millions
CAEP/8-IP/29

Appendix

5.2.9 Figure 5.4 demonstrates the similarities between the APMT-Economics and NOx-CSM

computations of the stringency effects by cost. 

5.2.10 There are some differences in the computation of the other individual cost components 

and each component makes a varying contribution to the overall comparison. The 

individual differences in computations therefore only make a limited contribution to the 

total cost difference and given the different modelling approaches the differences are 

sometimes more marked at a detailed level. Generally there is a consistency in the 

pattern of differences between the two approaches and the following observations and 

explanations for the differences between the two modelled estimates can be made:

 Production Costs – Account for 8% of the total NOx-CSM costs for Stringency 

option 7 and 5% of the total NOx-CSM costs for Stringency option 10. APMTEconomics computes recurring production costs that are slightly lower that those 

computed by the NOx-CSM. The reason for this is the different treatment of the 

additional production costs in the two models. In the NOx-CSM, the costs are 

assumed to be incurred in the year that new aircraft are purchased and in APMTEconomics the new aircraft purchase price is increased to account for the additional 

production costs and then manifests itself in the computation of annual capital costs 

(through the sum of ongoing depreciation and finance costs) in each forecast year. 

In absolute terms, the differences between the two methods are not large and 

APMT-Economics would be expected to compute a lower effect since the additional 

costs for the purchase of an individual aircraft are spread over the aircraft’s 

lifetime.

 Maintenance Costs – Account for 16% of the total NOx-CSM costs for Stringency 

option 7 and 10% of the total NOx-CSM costs for Stringency option 10. APMTEconomics consistently computes slightly (13%) higher maintenance costs than the 

NOx-CSM across each of the stringency options and implementation years. The 

difference is explained by the APMT-Economics modelling of maintenance costs that 

assumes that these costs increase as aircraft age. In this analysis, the 

maintenance cost of the response to the stringency was assumed to apply to the 

maintenance costs for a new aircraft and therefore increases on an annual basis 

compared to the static assumption employed in the NOx-CSM.

 Fuel Costs - Account for 27% to 32% of the total NOx-CSM costs for Stringency 

option 7 and 44% to 50% of the total NOx-CSM costs for Stringency option 10. 

APMT-Economics computes a lower fuel cost than the NOx-CSM in all scenarios. In 

percentage terms the difference is approximately 8% for Stringency Option 7, and 

less than 1% for stringency option 10 implemented in 2016. As noted above there 

is a small difference in the fuel use/CO2 effects used by the two models, and this 

cost difference is explained by the different treatment of the fuel price. In the NOxCSM the fuel price is fixed however APMT-Economics takes account of the change in 

the fuel price from its value in the calibrated 2006 Datum situation and the 

interpolation between the outputs for 2006 and 2016 for the forecast years 2012 to 

2015 includes a steadily growing fuel price up to the fixed 2016 level. Therefore in 

the 2012 implementation, the effective average fuel price in the APMT-Economics 

computation is expected to be less than that employed in the NOx-CSM.
5 Comparing APMT-Economics and NOx-CSM Results

CAEP/8-IP/29

Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 5.7

 Lost Revenue – Accounts for 10% of the total NOx-CSM costs for Stringency 

option 7 and 15% of the total NOx-CSM costs for Stringency option 10. The APMTEconomics for Lost Revenue is lower than that for Stringency Option 7 and slightly 

higher for Stringency Option 10. Overall the percentage and absolute differences 

between the two modelled computations are relatively small.

 Spare Engines – Account for 33% to 42% of the total NOx-CSM costs for 

Stringency option 7 and 19% to 27% of the total NOx-CSM costs for Stringency 

option 10. Again the largest differences between the two computations are for 

Stringency option 7 where the individual differences are up to 14%.

Figure 5.4 Differences between APMT-Economics and NOx-CSM by Cost 

Component

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

Str07 OPS

2012

Str07 OPS

2016

Str10 OPS

2012

Str10 OPS

2016

Str07 NCM

2012

Str07 NCM

2016

Str10 NCM

2012

Str10 NCM

2016

a. Non-Recurring E&D Cost c. Incremental Engine Production Cost

d. Annual Maintenance Cost Increase e. Annual Fuel Cost Increase

f. Annual Loss Revenue (MTOW limited flights) g. Cost in Additional Spare Engines

APMT-Economics Forecasts of Cost-effectiveness

5.2.11 The overall cost-effectiveness comparison is presented in Figure 5.5 for eight tests as 

combinations of stringency options, non-recurring cost estimate and implementation year,

assuming no application of discounting (0% rate). Given the previous presentation of 

very similar NOx saving outputs and the similarities in the overall cost computations, the 

overall cost-effectiveness comparisons are consistently close between APMT-Economics 

and the NOx-CSM19.

 

19 It is noted that there is a difference in the assignment of one engine type where the NCM has this classified as 

an MS2 modification and APMT-Economics modeling has assumed it to be compliant. However, this engine would 
CAEP/8-IP/29

Appendix

Figure 5.5 Comparison of Overall Cost-effectiveness Results (0% Discount Rate)

Cost Effectiveness Comparison (with Spares)

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

Str7 2012

Low

Str7 2012

High

Str7 2016

Low

Str7 2016

High

Str10 2012

Low

Str10 2012

High

Str10 2016

Low

Str10 2016

High Cost per Tonne LTO Nox Reduced

NCSM

APMT-E Stringency

Implementation 

Year

Recurring 

Cost 

Scenario NCSM APMT-E % Difference

Absolute 

Difference

7 2012 Low $ 10,807 $ 10,089 -6.6% $ -718 

7 2012 High $ 12,070 $ 11,337 -6.1% $ -732 

7 2016 Low $ 12,669 $ 11,812 -6.8% $ -857 

7 2016 High $ 14,253 $ 13,400 -6.0% $ -853 

10 2012 Low $ 21,669 $ 21,870 0.9% $ 201

10 2012 High $ 24,196 $ 24,408 0.9% $ 213

10 2016 Low $ 23,593 $ 23,886 1.2% $ 293

10 2016 High $ 26,763 $ 27,113 1.3% $ 349

Cost per Tonne LTO NOx Reduced

 

only be used on less than 3% of flights and the costs of MS2 modifications are relatively small (i.e., no fuel effects 

and small production and > maintenance costs relative to those for MS3) so this is not sufficiently material to 

explain the higher difference between the NCM and APMT-Economics for stringency 7.
5 Comparing APMT-Economics and NOx-CSM Results

CAEP/8-IP/29

Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 5.9

5.3 Comparison of the APMT-Economics Results from Economics-led with the 

Operations-led Approach

5.3.1 The comparison between APMT-Economics in operations-led and economics-led modes 

needs to be made with the default assumption that there is no effect on demand in 

response to cost changes; effectively using the common assumptions employed in the 

NOx-CSM.

5.3.2 There will be some differences in absolute forecasts from APMT-Economics in Operationsled and Economics led mode because even though the same underlying operating cost 

processing is used, the forecasts are based on different forecasts of aircraft operations 

and representations of the FESG fleet forecasts at an aircraft level. However, the cost 

differences between the two approaches are expected to be broadly of the same order 

and the rank ordering of effects expected to be consistent.

5.3.3 Figure 5.6 illustrates the total costs of stringency option 7 and option 10 tests for the 

economics-led and operations-led approach approaches. As expected, the costs of the 

stringency measures are forecast to be consistently higher from the tests using APMTEconomics in both percentage and absolute terms. Overall the economics-led 

computations are 15% higher for Stringency option 10 and 30% higher for stringency 

option 7. Importantly, the ranking of the effects of the measures is intuitively consistent

and the contribution of each of the cost components to each of the outputs is also 

consistent.

5.3.4 Part of the cost difference is explained by the inclusion of a greater part of the FESG fleet 

and operations forecasts in the Economics-led tests; as noted in Chapter 2 the MODTF 

application of the FESG forecasts excluded seat class, route-group and stage length 

combinations that were not present in the 2006 Datum. Therefore, the economics-led 

figures are produced from a slightly larger volume of underlying aviation activity. This 

accounts for approximately one third of the absolute difference, $1.3Bn in absolute total 

cost terms. Without this effect, the size of the differences between the two approaches 

would be much smaller and separate tests where the operations are more closely 

matched demonstrate that the costs would be higher by between 10% and 20%.

5.3.5 At a detailed level, the remainder of the difference in results can primarily be explained by 

the difference in treatment of aircraft retirement; where, in the economics-led mode there 

is a continual retirement of aircraft for the model to remain internally consistent and this 

leads to an increased requirement for new fleet turnover and hence an increased effect on 

all cost components.

5.3.6 The size of the differences in the forecast of the effects between the two approaches of 

$3Bn need to be put in context of the overall airline industry costs of approximately 

$420Bn per annum in 2006 and forecast to rise to approximately $1600Bn in 2036. At 
CAEP/8-IP/29

Appendix

this level the total costs of stringency option 10 ranges from between $30Bn to $35Bn 

across all forecast years from 2012 or 2016 to 2036.

Figure 5.6 Comparison of Total Costs from Economics-led and Operations-led 

APMT-Economics Tests (High Recurring Costs, 0% Discount)

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

Str07 ECS

2012

Str07 ECS

2016

Str10 ECS

2012

Str10 ECS

2016

Str07 OPS

2012

Str07 OPS

2016

Str10 OPS

2012

Str10 OPS

2016

a. Non-Recurring E&D Cost c. Incremental Engine Production Cost

d. Annual Maintenance Cost Increase e. Annual Fuel Cost Increase

f. Annual Loss Revenue (MTOW limited flights) g. Cost in Additional Spare Engines
CAEP/8-IP/29

Appendix 

APMT-Economics and Its Application in the CAEP/8 NOx Stringency Analysis 6.1

6 Concluding Remarks

6.1.1 Through this study the APMT-Economics tool has demonstrated its application to a NOx 

stringency analysis. It has demonstrated flexibility in employing assumptions that match 

those prepared by FESG and also importantly, when applied in economics-led forecasting 

mode, can produce comprehensive and internally consistent forecasts of the effects of 

NOx stringency measures including consistent demand responses to cost changes.

6.1.2 In economics-led model APMT-Economics has demonstrated that despite being a complex 

and detailed model it has the fidelity to reliably and consistently model the demand and 

costs of interventions relative to a Baseline, that invoke only relatively small cost 

changes, down to the level of a 0.2% annual increase in overall airline operating costs.

6.1.3 The APMT-Economics results compare well to those of the NOx-CSM overall. At a detailed 

level, despite using different approaches to modelling the stringency measures and the 

overall scale of aviation industry costs, the results at a component level were shown to 

have a good degree of consistency.

6.1.4 The overall benefits of undertaking this analysis with APMT-Economics are that:

 The APMT-Economics tool has demonstrated its ability to provide consistent results 

in two modes of operation.

 The demand responsive and comprehensive cost forecasting features of APMTEconomics have proved valuable in demonstrating to some CAEP-FESG members 

that the underlying assumption that demand effects can be largely ignored for the 

main stringency analysis using the NOx-CSM is reasonable.

 CAEP-FESG can have confidence that the results from NOx-CSM were independently 

confirmed for a sample of the stringency tests being undertaken for CAEP.
 CAEP/8-IP/29

Appendix

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